Liverpool's belt tightening leaves Benitez in a squeeze

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Rafael Benitez's difficult relationship with Liverpool's American owners will be severely tested after it emerged that George Gillett Jr and Tom Hicks will refuse to sanction even a free signing during the January transfer window. The Liverpool manager was made aware of the embargo long before Sunday's long-awaited peace summit at Anfield immediately after the defeat to Manchester United.

The Americans did not wait until they arrived last week to inform Benitez of the limitations imposed on him. It is understood Benitez has been told he will be not be able to sell, or buy at all during the transfer window and two free signings he had hoped to make would not be considered by the board either.

It came as a major blow to Benitez whose long-term future at the club has been under serious doubt ever since his first fall-outs with the Americans last month. Although Liverpool and Gillett have attempted to put a more positive spin on the events of the last two days it is not how Benitez sees events in private. He is disbelieving at the limitations placed on him by the board who will have seen first hand on Sunday the need to strengthen the Liverpool squad.

Whether the Americans' position changes in the next few weeks is not clear but Benitez certainly went into Sunday's meeting on the understanding no funds would be made available for transfers in January. Yesterday Gillett, who spoke at a meeting of former Liverpool players, was ambiguous about January signings saying only, in terms of the transfer window, "we might use the option that gives us, or we might not."

A statement released by the club on Sunday night claimed that the meeting between Hicks, Gillett, his son Foster, Benitez and chief executive Rick Parry had been "amicable". Gillett attempted to keep the mood upbeat once again when he said that after the fallout between the two parties the "focus has to be on finding a common platform to continue our co-operation."

He added: "Rafa is the one we want as a manager further on, and we have faith in him. I've been married over 40 years and have first hand knowledge about how to solve an argument. We concentrated on getting an overview over the situation, and I felt we accomplished that."

The dispute between Benitez and his bosses began with his criticism of them for lacking understanding of the workings of the transfer market last month and escalated with Hicks warning his manager "to quit talking about new players and coach the ones that we have." That message would appear to have been reinforced over the last few days.

Parry also warned that Liverpool have had to revise their ambitious plans for the new 70,000-capacity stadium planned for the 2011-2012 season. He said: "The new stadium will be a significant improvement on the original plans and a slightly downgraded version of the new ones."